CCPartners has blogged about the benefits of including
termination clauses in employment agreements and the common
pitfalls associated with drafting these clauses. You can see that
The Ontario Superior Court recently provided employers with yet
another reminder about the care that has to be taken when drafting
employment contracts and particularly their termination
In Miller v. A.B.M. Canada Inc., Paul
Miller was hired by A.B.M. Canada Inc. as a management accountant.
Upon being hired, Miller entered into an employment agreement with
A.B.M. which contained a termination provision limiting notice of
termination to the minimums provided by Ontario's
Employment Standards Act, 2000 ("ESA").
The termination clause stated as follows:
Regular employees may be terminated at any time without cause
upon being given the minimum period of notice prescribed by
applicable legislation, or by being paid
salary in lieu of such notice or
as may otherwise be required by applicable legislation.
When A.B.M. discovered a number of shortcomings in Miller's
performance, the decision was made to terminate his employment on a
without-cause basis. By that time, Miller had been employed for 17
months and was therefore entitled to two weeks' notice of
termination, or pay in lieu of notice, as prescribed by the
ESA. When A.B.M. provided Miller his two weeks' pay in
lieu of notice, he brought a wrongful dismissal claim, arguing that
the termination provision did not meet the requirements of the
ESA and that he was entitled to the common law standard of
reasonable notice instead.
A.B.M. argued that the termination clause was set out in plain
language and was clear in limiting Miller's notice to two
The Court disagreed with A.B.M., finding that the termination
provision did not extend Miller's pension contributions or car
allowance for the duration of the notice period, as required by section 61(1) of the ESA. The Court
based this finding on the fact that Miller's pension
contributions and car allowance were not included under the heading
of "salary" in the employment agreement, while the
termination provision only allowed for "salary" in lieu
The law is clear that contract provisions that provide a lesser
benefit than the ESA minimums are void. Since the
ESA minimums provide for benefit continuation and the term
"salary" – as defined in the contract and specified
in the termination clause – did not, the Court found the
termination clause in Miller's employment agreement to be void
and awarded him three months' common law reasonable notice.
What is especially concerning for employers about this decision
is that the Court failed to address the portion of the clause that
stated "or as may otherwise be required by applicable
legislation". This phrase appears to clearly set out the
mutual intention of the parties to limit payments in lieu of notice
of termination to the statutory minimums, and yet was ignored by
In total, Miller was awarded $38,050.39 in common law damages
whereas he would have received only $9,690.00 pursuant to the
While requiring employees to enter into employment agreements
containing enforceable termination provisions is one of the easiest
and most cost-effective ways for employers to reduce the costs of
doing business, this decision clearly illustrates the importance of
periodically reviewing employment agreements and templates to
ensure compliance with ongoing developments in the law.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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